How China’s Record Low Birth Rate Threatens Innovation and Economic Growth

China’s announcement that its birth rate has hit a record low since 1949 sends shockwaves across the globe. With two-thirds of the world’s population living in countries where fertility rates are below replacement level, demographic decline is becoming a global problem.

Trip.com co-founder James Liang warns that falling birth rates threaten innovation and technological progress. He advocates for “innovationism,” which posits that more people mean more talent to fuel progress. However, this view is not universally accepted by academics. Research suggests that lower birth rates actually lead to higher growth in GDP per working-age adult, with no effect on total GDP.

Liang argues that governments must spend more on pro-family policies to boost fertility rates. He estimates that every 1% of GDP invested raises fertility rates by just 0.1. To achieve a full child increase would require an astronomical 10% of GDP - an investment he believes is necessary for economic growth.

However, some economists question the effectiveness of Liang’s proposed solutions. Claudia Goldin argues that women delay having children until the unequal distribution of household work is resolved, requiring more than just cash transfers or subsidized daycare.

The debate surrounding demographics and innovation is complicated by Liang’s own views on education. He suggests that highly intense systems can push young people to delay or forgo starting a family. But what about the flip side - could relaxed exam pressures actually boost fertility rates?

Governments are scrambling to reverse demographic decline, with Trip.com Group offering cash bonuses and subsidizing fertility treatments like egg freezing for its employees’ families. However, it remains unclear whether these measures can make a significant dent in the problem.

The crisis of falling birth rates threatens economic growth and innovation. Liang’s warning that we need to spend more on pro-family policies may be an oversimplification of a multifaceted problem, but it is a necessary starting point for the conversation.

The Global Context: A Demographic Crisis

Demographic decline extends far beyond East Asia, where Japan, South Korea, Taiwan, and Hong Kong have all moved into “super-aged” status. Developing countries like Thailand, Vietnam, Malaysia, and the Philippines are also reporting falling birth rates - with India’s total fertility rate hovering around 1.9 births per woman.

This is not just a demographic problem; it’s an economic one as well. As populations shrink, labor forces decline, leading to skills shortages, reduced innovation, and stagnating economies. Liang’s warning that a declining population threatens our ability to innovate is not hyperbole - it’s a pressing concern for policymakers around the world.

The Role of Governments: Can Policy Reverse Falling Birth Rates?

Governments are trying various measures to boost fertility rates, including extended parental leave, baby bonuses, and childcare subsidies. However, these efforts have met with limited success. South Korea’s fertility rate has edged upward for two consecutive years, rising from 0.72 children per woman in 2023 to 0.80 in 2025 - but this is still far short of the replacement rate.

Liang sees these policies as a good start but argues that much more needs to be done. He estimates that spending equivalent to 10% of GDP would be required to raise fertility rates by a full child - what China or South Korea would need to do to approach stability. This is an astronomical sum, but Liang suggests it’s a necessary investment for economic growth.

The Limitations of Innovationism

Liang’s views on the role of demographics in driving innovation are not without controversy. Some economists argue that lower birth rates actually lead to higher growth in GDP per working-age adult - and have no effect on total GDP. Instead, they suggest that companies invest in labor-saving technologies due to a decline in younger populations.

This challenges Liang’s assertion that more people mean more talent to fuel progress. It also raises questions about the effectiveness of his proposed solutions - do cash transfers or subsidized daycare actually work? The research is unclear, and it’s time for policymakers to take a closer look at the evidence.

A New Approach: Beyond Cash Transfers

Liang’s emphasis on cash transfers and pro-family policies may be too simplistic. Other factors like education, household work distribution, and women’s participation in the workforce are equally important. The debate surrounding demographics and innovation is complicated by Liang’s own views on these issues - but it’s a necessary conversation for policymakers around the world.

As the world’s population continues to age, we need new solutions - and fast. Liang’s warning that falling birth rates threaten economic growth and innovation is a pressing concern for policymakers worldwide. The question remains: what comes next?